Business funding for retailers

A shop borrows to buy stock before it sells it, to fit out a store, to open another one or to buy the building. Stock is best funded with a facility you draw and repay, such as a revolving credit facility, an overdraft or trade finance, because the need rises before the busy season and falls after it. A shopfit and a second store need a term loan or asset finance, and premises need a commercial mortgage.

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Stock before the season

Retail cash runs in a loop. You pay a supplier for stock, the stock sits on the shelf or in the stockroom, a customer buys it, and the card payment reaches your bank a day or two later. The longer the stock sits, the more cash it holds. A shop selling gifts, toys, clothing or garden goods buys heavily months before its peak, so the bank balance is at its lowest just as the shop is fullest.

That gap is the main reason retailers borrow. The right facility rises with the stock build and falls as the stock sells, so you pay interest only while the money is out. A term loan taken for stock leaves you paying for months after the stock has sold, and an overdraft that is too small forces you to buy less than the season needs.

Suppliers set the shape of the gap. A supplier who gives 60 days’ credit funds part of your stock for you; one that wants payment with the order leaves it all to you. An overseas supplier may want a deposit when you order and the balance before it ships, which is where trade finance comes in: the funder pays the supplier and you repay once the goods arrive and start to sell.

The cash cycle calculator works out how many days your cash is tied up between paying a supplier and being paid by a customer, and so how much stock funding you need.

Funding a Christmas stock build

Illustrative example

An independent shop buys extra stock in September to sell by the end of December, funded on a revolving credit facility. The rate, the fee and the margin are assumptions.

Stock bought in September: £80,000
Drawn on the facility for: 4 months
Interest at an assumed 10% a year: £2,666.67
Arrangement fee (assumed): £800.00
Sales of that stock, excluding VAT, at an assumed 100% mark-up: £160,000
Gross profit on the stock: £80,000
Finance cost as a share of the gross profit: 4.3%

If a third of the stock is still unsold in January, the facility stays drawn and the finance cost rises with every month it waits. A lender reads your stock turn and your January markdowns for that reason.

A café worker handing a bagged pastry to a customer across the counter

Card takings, rent and rates

Card payments settle into your account a short time after the sale, on your card processor’s terms, so a shop holds little cash from customers. Rent is the largest fixed cost, and if your lease sets it quarterly in advance it leaves in lumps. Plan stock purchases so that a rent quarter and a supplier payment do not fall in the same week.

Shops in England with a rateable value below £500,000 are charged on the lower retail, hospitality and leisure multipliers from 1 April 2026: 38.2p in the pound below £51,000 and 43.0p from £51,000 to £499,999 for 2026 to 2027. Properties at £500,000 and above pay 50.8p. Scotland, Wales and Northern Ireland set their own rates.

A shop that sells alcohol needs a premises licence under the Licensing Act 2003 in England and Wales, and a buyer of the business has to apply to transfer it.

Overdraft, revolving credit or trade finance

	Business overdraft	Revolving credit facility	Trade finance
What it pays for	Day-to-day gaps in the current account	A stock build drawn and repaid through the year	A specific order from a supplier, paid at order or before shipping
How you repay	Paid down as takings come in; the bank can ask for repayment on demand	Repaid and redrawn up to the limit over an agreed term	Repaid from sales once the goods arrive, over an agreed period
What the lender looks at	Your account history and the year’s accounts	Your accounts, management figures and stock records	The order, the supplier and your record of selling that stock
Where to read more	Business overdrafts	Revolving credit facilities	Trade finance

What worries a lender about a shop

A lender lending against retail stock values it at what someone would pay for it on a bad day. Fashion and seasonal goods lose much of their value once the season ends, so lenders treat them as weak security and look harder at your trading. Stock records that show what you hold, how old it is and how many weeks each line takes to sell are the strongest answer.

The second worry is the premises. A shop on a lease that ends before the loan does, or with a break clause the landlord can use, can lose its trade overnight. The third is the share of your sales that comes from one place: one supplier whose range you depend on, or one marketplace that sells your online stock. Show where your sales come from and how you would replace the largest source.

Opening a second store is judged on the first store’s figures. A lender wants to see that the existing shop covers the new debt while the new one builds its trade, and the Growth Guarantee Scheme can back part of a loan where security is short.

Documents to have ready

Two years of filed accounts and current management accounts
A stock report by line, with ages and sell-through
Twelve months of bank and card processor statements
VAT returns for the last four quarters
The lease, with review dates and any break clause
Supplier terms and the purchase orders the money is for
A twelve-month cash flow forecast showing the peak borrowing

What documents a lender asks for explains what each one is used for.

Your premises, your pension and your guarantee

If you trade from a shop you could buy, a commercial mortgage turns rent into repayments on an asset you own. A director’s pension scheme can buy the shop instead and let it to your company at a market rent, so the rent goes into your pension. Using your pension to buy commercial property.

Stock facilities for a limited company come with a personal guarantee where the company’s assets are thin. What a personal guarantee means for a director explains what you are signing.

Working capital calculator

The days between paying for stock and being paid by customers, and the working capital that gap ties up.

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Questions people ask

How can a shop fund stock?

With a facility that rises and falls with the stock: a revolving credit facility, an overdraft, or trade finance for a specific order from a supplier. Each lets you draw money before the season and repay it as the stock sells, so you pay interest only while the money is out. A term loan suits a shopfit or a second store better than stock, because its repayments carry on after the stock has sold.

Can I get a loan to fit out a shop?

Yes. A shopfit is paid for with a business loan, and the parts that are equipment, such as tills, refrigeration and display lighting, can sit on hire purchase or a lease. A lender wants the quotes, your trading figures and the lease, which should run beyond the end of the loan. A new shop with no trading record is judged on your experience and the money you are putting in.

Will a lender take stock as security?

Some lenders do, through a stock finance facility or a charge over the company’s assets, but they value stock at what it would sell for in a hurry. That makes seasonal and fashion stock weak security. Lenders look harder at your trading record and accounts, and a debenture over the company is the usual way they take stock into account. What a debenture is.

Do shops get a business rates discount?

In England, from 1 April 2026, shops with a rateable value below £500,000 are charged on lower retail, hospitality and leisure multipliers: 38.2p in the pound below £51,000 and 43.0p from £51,000 to £499,999 for 2026 to 2027. They replaced the old percentage relief. Small business rate relief can also apply, and Scotland, Wales and Northern Ireland have their own schemes.

Finance is subject to status and to the lender’s terms. A personal guarantee makes you liable for the company’s debt if it does not repay, and it can be enforced against your own assets, including your home. Nothing here is a personal recommendation.

Business funding for retailers

Stock before the season

Funding a Christmas stock build

Card takings, rent and rates

Overdraft, revolving credit or trade finance

What worries a lender about a shop

Documents to have ready

Your premises, your pension and your guarantee

Working capital calculator

Questions people ask

Funding by sector

Revolving credit facility

Trade finance

Business funding for ecommerce businesses

Business overdraft

Business funding for retailers

Stock before the season

Funding a Christmas stock build

Card takings, rent and rates

Overdraft, revolving credit or trade finance

What worries a lender about a shop

Documents to have ready

Your premises, your pension and your guarantee

Working capital calculator

Questions people ask

Funding by sector

Revolving credit facility

Trade finance

Business funding for ecommerce businesses

Business overdraft

Start a funding search

Cover for a personal guarantee